Do you know about Form 709 for USA gift taxes for expats? Don’t worry at all! Stay tuned at USTAXFiling.in where you will get all the updates related to Form 709!
If you give a gift to someone more than $16,000 this financial year, you have to file Internal Revenue Service (IRS) Form 709. The form 709 is no doubt tough for expats. Luckily, at USTAXFiling, we are here to help you get all the insights. In this article, we will take a look at what expats must know about the US gift tax and Form 709. Let us start now!
- The US gift tax is applicable to an individual who gives the gift and not the one who gets it.
- When a US individual transfers property or cash to another individual without asking for anything in return, it is called a gift. If this gift meets a specific threshold, then it is subject to the US gift tax and should be compulsorily reported on Form 709.
What is Form 709?
Form 709 is an Internal Revenue Service form that is used to report specific taxable gifts. If an income taxpayer provides a gift that is subject to the US gift tax, they should fill out Form 709 and must file it by following the deadline.
What Is the US Gift Tax?
When a US individual transfers their asset or cash to another individual without any need to make payment in return, that is called a gift. If that gift meets specific conditions, it is subject to the US gift tax and should be reported on IRS Form 709.
What Qualifies as a Taxable Gift?
The IRS (Internal Revenue Service) defines a gift as anything valuable virtually that a US individual gives to a person without being paid in return. It includes transfers in the form of:
- Forgiven debts
- Financial accounts such as stocks
- Interest-free loans
- Tangible assets such as jewelry, a house, or even a car
Not all US gifts are taxable under the US gift tax. Only gifts that exceed the yearly gift tax exemption should be reported. For the 2022 financial year that is filed in 2023, the yearly gift tax exemption is $1600. It is the amount you may gift to another individual without triggering the US gift tax. If the amount is exceeded, your gift may become taxable and should be reported. It is also true in case you exceed the criteria with multiple gifts or a single gift given to the same individual.
For instance, let us say you gave a car to your son that cost you $20,000 at the start of the year. As this gift exceeds the $16000 criteria, you might have to report it as an income-taxable gift. If you instead gave your son a cash amount in January of $10,000, then a second cash gift of $8,000 in August, it might become eligible as an income-taxable gift as the two amounts exceed the yearly gift US tax exemption.
Also, the yearly US gift tax exemption implies only gifts given to a single individual. If you give more than $16,000 to many individuals but never more than $16,000 to any one individual, those US gifts are not at all taxable. The 2023 yearly US gift tax exemption for married couples who file jointly doubles to $32,000
What Types of Gifts Are Tax-Exempt?
Not all US gifts are subject to the US gift tax, even if they exceed the yearly US gift tax exemption. In many cases, you may not have to file IRS Form 709 for these kinds of gifts:
- Gifts to a political organization
- Payment of medical costs involved
- Payment of tuition for an educational institution
- Gifts to your partner (it only applies if your partner is a US individual; if they are not, your gift might not be exempt)
You may even deduct gifts that are given to eligible charities when you file your income tax return.
Who Files Form 709?
The US gift tax is applicable to an individual who gives the gift, not the one who gets it. It means that if you give away an income-taxable gift, you should report that to Form 709. If you are the receiver of a taxable gift, then you don’t have to file this form.
Will You Owe Taxes When You File IRS Form 709?
For several income taxpayers, IRS Form 709 is a purely informational tax form and does not create any liability of tax. It is due to the fact all US individuals have a lifetime US gift tax exemption of $11.4 million. Even if you exceed the criteria to file, you might have to start paying income taxes on any further gifts you give away.
How Does the US Gift Tax Apply to Non-US Individuals?
Does the US gift tax imply when there is a foreign individual who is involved in the transaction? The answer to this question is based on who gives the gift.
- If a US individual offers any taxable gift to another individual, the US individual should always file IRS Form 709. It does not matter if the recipient is a US individual or not
- If a foreign individual gives a gift of any amount to a US individual, the foreign individual doesn’t have to file IRS Form 709. The only exception is if the gift is a tangible property located in the USA, such as a house
The receiver never has to file IRS Form 709.
When Is Form 709 Due?
The deadline for IRS Form 709 is similar to the due date for your US income tax return. In many years, it might be from 18th April 2023
What Happens If You Don’t File IRS Form 709 on Time?
As with many income tax forms, failure to file IRS Form 709 when needed might result in charges. The common charge is a 5 percent fine of the value of the US gift for every month past due, with a maximum charge of 25 percent.
How Do You File IRS Form 709?
If you have to file IRS Form 709, you must follow these vital steps that are:
- You must ensure to collect all information that you may need to complete the form, like documents related to a gift.
- You must download your completed form and print it. You cannot e-file the IRS Form 709
- You should fill out IRS Form 709 on the site. The form is a five-page document with sections that cover your personal details and information on any income-taxable gifts that you made. Based on what you are reporting, you don’t have to complete each and every section.
- You should mail the IRS Form 709 to the IRS (Internal Revenue Service) at their service center in Kansas City, Missouri. Ensure that you email your IRS Form 709 before the yearly deadline.
Once you complete your IRS Form 709 in the mail, you are set. If you need time to prepare your IRS Form 709, you may file for an extension using IRS Form 8892. It may provide you with an automatic six-month extension that extends the 15th October deadline. Also, if you file Form 4868 for an extension for your yearly income tax return, you might have an automatic extension for IRS Form 709. You don’t have to file the IRS Form 8892 separately.
IRS Form 709 is a complex tax form. We would suggest you consult a qualified tax consultant before you attempt to file the IRS Form 709 independently.
Have Questions about IRS Form 709? Get the Answers You Need!
We hope this article has been helpful to you and will be useful to know all the answers related to IRS 709. If you still have any doubts about filing your expat income tax return in the USA, you can reach out to USTAXFiling experts. Our USTAXFiling experts are highly qualified and educated to help you with income tax filing. If you are looking for a tax consultant in the USA, USTAXFiling is among the top tax consultants in the USA. Our USTAXFiling experts always ensure to discuss with you all the expat tax-related queries and resolve them at the earliest. They have all the latest updates related to US expat taxes, so you can sit back and relax while they take care of your expat tax filing. So, schedule a call with us at USTAXFiling now!